One of the biggest shareholders of Stock Spirits (LON: STCK) has called for the firm to pay a special dividend.
At the start of the month, Stock Spirits saw their shares rally following strong revenue gains.
Stock Spirits said said for the financial year ended September 30 its revenue rose 9.2% to €312.4 million from €282.4 million in a comparative period a year ago.
Another impressive figure which caught shareholder interest was that pretax profit had risen 24% from €282.4 million to €312.4 million.
The update that was given was impressive as the firm had won business in a time where competitors such as such as Fever-Tree (LON:FEVR) saw its shares crash following a modest update in November.
Western Gate Private Investments, has repeatedly pledged Stock Spirits to change their strategy and management across the last three years.
Francisco Santos, director of Western Gate, said: “We have previously requisitioned the company for change, and this has resulted in an improved recent performance.
“The company has plenty of headroom to increase leverage to 1.25x EBITDA, well inside the management target of 0.5x – 1.5x EBITDA and as such we believe should be rewarding shareholders with a special dividend.
“We demand a review of the capital allocation policy and the payment of a special dividend to align shareholder returns to the sector peers.”
The investor said on Thursday that while Stock Spirits’ management was improving operating performance, the board was “unwilling” to return cash to investors and had overseen a “poor performance” since its stock market listing in 2013.
Western Gate also added that Stock Spirits offers one of the lowest cash returns to shareholders among its peers, with a current dividend payout of 60.5% versus an average across the sector of 71.29%, which does raise an answer to why Western Gate have been pursuing the dividend lift.
Stock Spirits are set to undergo what looks to be a very positive time of trading, as the British pub and restaurant industry appears to be picking up.
Henceforth the question as to whether Stock Spirits could pay a special dividend may be dependent on the companies performance across the festive period.
Stock Spirits, in an e-mailed response to Reuters, said it continued to assess a range of “more meaningful and value-creating M&A opportunities” in existing and new categories and markets.
“However, as we have consistently said, if such opportunities are not realised, we will of course consider making additional shareholder distributions,” the company said.
Western Gate holds a 10% sake in Stock Spirits, called a dividend of £0.1047 per share and also asked the firm to consider a restricting program of how it allocates capital.
“Since 2017, the company has spent 47.5 million euros on three acquisitions. Despite this investment, shareholders will not see any returns on this invested capital until 2023,” Western Gate said.
Panmure analyst Matthew Webb said that institutional shareholders were likely to support the management’s current strategy.
“This proposal (by Western Gate) is much less aggressive than previous episodes,” he said.
Shares in Stock Spirits trade at 201p (+0.75%). 19/12/19 13:22BST.